NEW YORK, Sept. 22 (Reuters) – JPMorgan Chase & Co (JPM.N) has embarked on a wave of boutique purchases this year, acquiring or investing in around 30 companies since early 2021.
In September alone, the bank took an almost 75% stake in Volkswagen’s payments business, bought Zagat’s own media company, and on Tuesday bought an academic financial planning platform used by more. of 5 million students in the United States. Read more
These three deals illustrate the contours of JPMorgan’s trading strategy, analysts and bank executives said: America’s largest bank is filling the few remaining holes in its deals, without facing the regulatory hurdles that would almost surely accompany it. larger transactions.
“These are small acquisitions and spanning a full spectrum, from payments to big data, have applications for AI and (provide) premium customer experiences,” said Mike Mayo, banking analyst at Wells Fargo.
“This is another reason why Goliath wins,” he added. “They can go ahead and choose forward looking, cutting edge technology companies and scale them across their global franchise.”
Although most of the agreements and their terms are not public information, Reuters estimates that JPMorgan bought and invested in around 30 companies in 2021, according to data from Refinitiv, Dealogic and media reports.
The average size of deals the bank has entered into this year is smaller than at almost any point in the past decade, Dealogic found, counting only those trades with disclosed value. The average transaction size last year was smaller.
It wasn’t until 2012 that JPMorgan closed more deals, according to Dealogic. The bank made 34 investments and acquisitions that year, again only counting transactions with disclosed securities.
“The advantage of our franchise is our scale,” said Leslie Wims Morris, who leads business development for Chase. “It’s less about the size of the deal and more about the strategic impact: what capabilities do we need and what experiences do we want to offer? “
JPMorgan is not alone in its lawsuits lately. Rivals have also bought companies or stakes in companies that thrive on algorithms, applications, data and a specific appeal to desirable customers in markets where they have no presence.
For example, Goldman Sachs Group Inc (GS.N) last week bought home improvement lender GreenSky for $ 2.2 billion, and on Tuesday Wells Fargo & Co (WFC.N) and Mastercard Inc (MA.N) participated in funding of $ 60 million. round for Bilt Rewards, a credit card loyalty startup that targets tenants.
While some of the deals are large enough to warrant the announcement of the purchase price, they are generally smaller and less significant than the mega-bank mergers that took place in the 1990s and 2000s.
U.S. regulators have been reluctant to approve deals that help the biggest financial firms grow. This is especially true under the Biden administration, which has a stated policy of cracking down on anti-competitive practices and whose Justice Department effectively rolled back a merger between two major insurance brokers in July.
There is also a problem of cost effectiveness in relation to size. The bigger US banks get, the more capital they have to hold against certain assets. Because JPMorgan is so large, it makes sense to target companies that provide services for a fee or may offer data on customer preferences, said Richard Bove, analyst for Odeon Capital Group.
“JPMorgan doesn’t want to increase its balance sheet, but it does want to increase its profits,” he said.
This dynamic, combined with the saturation of JPMorgan in the United States, explains its 75% stake in Volkswagen Payments SA; its acquisition of UK digital asset manager Nutmeg; and a 40% stake in C6 Bank, a popular digital lender in Brazil, he said.
Investing internationally also gives JPMorgan an edge over domestic competitors like Citigroup Inc (CN), which has abandoned much of its global consumer operations, analysts said.
JPMorgan is also looking at some big deals, but some of this year’s deals just went faster, said Ben Hesse, the bank’s head of strategy and business development for the asset and wealth management unit.
His division oversaw the recent acquisitions of fintech start-up OpenInvest, forest manager and forest investor Campbell Global LLC and a minority stake in Kraft Analytics Group, the sports-focused data analytics company.
“Just because we haven’t announced anything important doesn’t mean that we haven’t looked at it,” Hesse told Reuters. “It’s just that the bar for these things is very, very high.”
Reporting by Elizabeth Dilts Marshall in New York Editing by Lauren Tara LaCapra and Matthew Lewis
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